The Chancellor delivered his budget speech, outlining the cost of the support that had already been provided due to the Covid-19 pandemic, the support that will continue, how they plan to start repaying the unprecedented borrowing and how they plan to rebuild the economy.
Due to the Covid-19 support, borrowing will exceed £407 billion, which is the largest peacetime support package. Clearly, this borrowing will need repaid, but without impacting those badly affected businesses and individuals.
As restrictions are lifted, the government have identified the importance of continuing its support, providing a further £65 billion of support.
Coronavirus Job Retention Scheme (Furlough)
The CJRS will be extended from 30 April 2021 to 30 September 2021.
During this period, employees will continue to receive 80% of their salary for hours not worked.
In April, May and June, the employer will be liable to pay for the employers NIC and pension contributions.
In July, the employer will be required to contribute 10% for the hours not worked, and 20% in August and September.
Self-Employment Income Support Scheme (SEISS)
The government confirmed that the fourth SEISS grant will be worth 80% of average trading profits, capped at £7,500. The grant will cover the period February, March and April, and can be claimed in late April.
Claimants must have filed a 2019/20 tax return, whereas the previous three grants were based on submission of the 2018/19 tax return. This means that over 600,000 may now be eligible when previously they were not.
A fifth grant was also announced to cover the period May to September 2021. Although further details will be announced in due course, the amount of claim will be dependent on reduction of turnover. People whose turnover has fallen by at least 30%, will continue to receive 80% of average trading profits, capped at £7,500. People whose turnover has fallen by less than 30% will receive a grant of 30%, capped at £2,850. This fifth grant can be claimed in late July.
We would remind you that one of the eligibility criteria was that you were significantly impacted by Covid-19, so if your trading has not been adversely affected, you should not claim. The government are allocated over £100 million pounds to fund a taskforce to track incorrect and/or fraudulent claims for Covid-19 support.
SSP will continue to be available from day 1 (rather than day 4) for those individuals who have been advised to self-isolate, and sick notes will be available by calling NHS 111.
The temporary £20 per week increase to Universal Credits will continue for a further 6 months. Also, whilst the outbreak is in existence, the "minimum income floor" for Universal Credits will be temporarily relaxed.
A one-off £500 payment will also be made to eligible Working Tax Credits claimants.
From 6 April 2021, a new "recovery loan scheme" will provide lenders with a guarantee of 80% on eligible loans between £25,000 and £10 million.
The government will provide "Restart Grants" in England of up to £6,000 per premise for non-essential retail and up to £18,000 per premise for hospitality, accommodation, leisure, personal care and gyms.
Further Discretionary Grants will also be available from local authorities, with further details being announced.
So, what were the main Tax announcements?
Income Tax / National Insurance
The personal allowance will increase to £12,570 from April 2021, and the higher rate threshold to £50,270. They will be frozen at this level until April 2026.
Those with earnings over £100,000 will continue to lose £1 of their personal allowance for every £2 of earnings over £100,000 (effectively taxing the income at 60%).
Scottish tax rates and allowances have previously been announced.
The Primary Threshold and Lower Profits Limit, for the employed and self-employed respectively, will be increased to £9,568 from April 2021, and the upper earnings limit to £50,270.
The upper earnings limit will remain at this level until April 2026, with other NIC thresholds being considered at future budgets.
The lifetime allowance, the maximum amount someone can accrue in a registered pension scheme in a tax-efficient manner over their lifetime, will remain at £1,073,100, until April 2026
As a reminder, the pensions annual allowance is the maximum amount of tax-relieved pension savings that can be accrued in a year. For those on the highest incomes, the annual allowance tapers down from £40,000. HM Treasury has reviewed the tapered annual allowance and its impact on the NHS (in particular high income earning doctors), as well as on public service delivery more widely. To support the delivery of public services, particularly in the NHS, the two tapered annual allowance thresholds will each be raised by £90,000. This means that from 2020-21 the "threshold income" will be £200,000, so individuals with income below this level will not be affected by the tapered annual allowance, and the annual allowance will only begin to taper down for individuals who also have an "adjusted income" above £240,000
For those on the very highest incomes, the minimum level to which the annual allowance can taper down will reduce from £10,000 to £4,000 from April 2020. This reduction will only affect individuals with total income (including pension accrual) over £300,000.
Capital Gains Tax
The annual exemption will remain at £12,300 until April 2026.
The rate of corporation tax will increase from April 2023 to 25% (currently 19%), on profits over £250,000.
In a welcome move, the rate for profits under £50,000 will remain at 19%.
There will be a relief for businesses with profits between £50,000 and £250,000, so that they pay less than the main rate of 25%.
Research & Development
The government will carry out a review of R&D tax reliefs and will consider all elements of the two R&D tax relief schemes. The objective of ensuring the UK remains a competitive location for cutting edge research, that the reliefs continue to be fit for purpose and that taxpayer money is effectively targeted.
The government have also increased the number of staff looking at R&D claims, to ensure only valid claims are made and to help fight fraud.
National Living Wage
Please note that as from April 2021, those aged 23 and over will now qualify for the NLW (previously 25 and over).
The National Minimum and Living wage will increase from April 2021, as follows:
- £8.91 per hour 23 yrs and over
- £8.36 per hour 21-23 yrs old
- £6.56 per hour 18-20 yrs old
- £4.62 per hour under 18
- £4.30 per hour apprentices under 19, or in first year of employment
As from April 2021, the employment allowance will remain at £4,000. This means that the first £4,000 of employers National Insurance will be exempt for employers with an NIC bill of £100,000 or less.
Van & Car Benefits
The flat-rate van benefit charge will increase to £3,500 as from April 2021
The flat rate van fuel multiplier will increase to £669.
The multiplier for the car fuel benefit charge will increase to £24,600.
From April 2021, the government will apply a nil rate of tax to zero-emission vans within van benefit charge. This measure will save businesses an estimated £433 per van in tax in 2021-22.
The IHT Nil Rate band threshold will remain at the existing level of £325,000 until April 2026. The residence NRB will continue at £175,000.
The government will continue to provide eligible retail, hospitality and leisure properties in England with 100% business rates relief, to 30 June 2021. After this date, the relief will be 66% to the end of March 2022. This is capped at £2 million per business for properties required to be closed on 5 January 2021, or £105,000 per business for other eligible properties.
The government will legislate to ensure that the business rates relief repayments that have been made by certain businesses are deductible for corporation tax and income tax purposes. This will ensure that these businesses are no worse off from a tax perspective than if they had paid the business rates in the first place. This will apply for repayments made to the devolved administrations as well as to those made in relation to England.
The VAT registration and deregistration threshold will be frozen at £85,000 for a further two years from April 2022.
Any business that took advantage of the VAT deferral on VAT returns from 20 March to 30 June 2020 can now opt to use the VAT Deferral New Payment scheme to pay the VAT in up to 11 equal payments, rather than all by 31 March 2021.
The temporary reduction to 5% VAT for the goods and services supplied by the tourism and hospitality sector will be extended to 30 September 2021. Then from 1 October to 31 March 2022, the VAT rates will be 12.5% before reverting back to the standard rate of 20%.
The Government will introduce legislation to apply a zero rate of VAT to e-publications from 1 December 2020, to make it clear that e-books, e-newspapers, e-magazines and academic e-journals there are entitled to the same VAT treatment as their physical counterparts.
Domestic Reverse Charge for building and construction services
A reminder that the DRC is now in force, as from 1 March 2021.
In a bid to encourage investment, from 1 April 2021 to 31 March 2023, companies investing in qualifying new plant and machinery will benefit from a 130% first year allowance.
Investing companies will also benefit from a 50% first year allowance for qualifying "special rate" assets.
A reminder that the Annual Investment Allowance was increased to £1m, which has been extended to 1 January 2022.
Therefore, in January 2022 the AIA will decrease back to £200,000, and any claim will be apportioned for accounting periods straddling the 31 December 2021, with possible restrictions that may apply to the unwary.
Structures and Buildings Allowances (SBA)
The annual rate for Structures and Buildings Allowance was increased to 3% from April 2020. New, non-resident structures and buildings will be eligible for this relief (capital allowance) where all the contracts for the construction works are entered into on or after 29 October 2018.
In order to make a claim, the claimant must have an interest in the land on which the structure/building is.
Claims for integral features and fixtures are unaffected and will continue to qualify for AIA.
Loss Carry Back – Extended
Currently a trading loss can be carried back one year. This is being temporary increased to three years, and is available to both incorporated and unincorporated businesses.
Unincorporated businesses and companies that are not members of a corporate group will be able to obtain relief for up to £2 million of losses in each of 2020-21 and 2021-22
Companies that are members of a corporate group will be able to obtain relief for up to £200,000 of losses in each of 2020-21 and 2021-22 without any group limitations.
Companies that are members of a corporate group will be able to obtain relief for up to £2 million of losses in each of 2020-21 and 2021-22, but subject to a £2 million cap across the group as a whole.
This will be legislated in the forthcoming Finance Bill. Further detail on the group cap will be announced in due course.
Stamp Duty Land Tax
The temporary increase to the residential SDLT nil rate band of £500,000 will continue to 30 June 2021.
From 1 July, the NRB will reduce to £250,000 until 30 September 2021, after which date it will revert back to its previous level of £125,000.
Worried how the Budget will affect you? Then why not get in touch with one of our tax specialists?